Custom, Excise & Service Tax Tribunal
M/S U.G. Sugar & Industries Limited vs Cce, Meerut-Ii on 29 September, 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R. K. Puram, New Delhi. Date of hearing/decision 29.09.2010 For approval and signature: Honble Shri Justice R.M.S. Khandeparkar, President -
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982.
2Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3Whether Their Lordships wish to see the fair copy of the Order?
4Whether Order is to be circulated to the Departmental authorities?
Excise Appeal No. 2269 of 2007-SM [Arising out of order-in-appeal No. 126-CE/MRT-II/07 dated 23.05.2007 passed by the Commissioner of Central Excise, Meerut-II] M/s U.G. Sugar & Industries Limited Appellant Vs. CCE, Meerut-II Respondent Appearance:
Rep. by Sh. Kamaljeet Singh, Advocate for the Appellants. Rep. by Sh. R.K. Gupta, DR for the respondent.
Coram: Honble Sh. Justice R.M.S. Khandeparkar, President Per: Justice Sh. R.M.S. Khandeparkar:
Heard the learned Advocate for the appellants and DR for the respondent.
2. This appeal arises from order dated 23.05.2007 passed by the Commissioner (Appeals) Meerut. By the impugned order, the appeal filed by the appellants against the order of the adjudicating authority has been dismissed. The Deputy Commissioner, Moradabad by his order dated 30.11.2006 had disallowed the cenvat credit in relation to the plates/ hot strip plates, channel & angle/ Plate, shape & section/ joist, M.S. bar and H.R. coil which was sought to be availed by the appellants and had confirmed the demand of Rs. 2,74,939/- alongwith interest thereon and has imposed penalty of Rs. 25,000/- under Rule 15 of the Cenvat Credit Rules, 2004.
3. The appellants are engaged in manufacture of industrial spirit, denatured spirit and absolute alcohol classifiable under chapter heading No. 22.04 of the schedule to the Central Excise Tariff Act, 1985. They have been availing the facility of cenvat credit on the inputs and the capital goods in terms of Rule 3 of Cenvat Credit Rules 2004. During the period from December 2005 to March 2006, the appellants availed cenvat credit to the tune of Rs. 2,74,939/- on the goods namely plates/ hot strip plates, channel and angle/ plate, shape & section/ joist, M.S. bar and H.R. coil classifiable under sub-heading No. 7208.51, 7208.52, 7216.31, 7216.21, 7216.10, 7216.50, 7214.99 and 7208.37 respectively of the schedule to the said Tariff Act on the ground that the goods were capital goods. A show cause notice dated 03.10.2006 came to be issued to the appellants on the ground that the said items did not fall in the category of capital goods as defined under Rule 2(a) of the said Rules. The proceedings sought to be initiated against the appellants were contested by the appellants while denying the allegations in the show cause notice. The adjudicating authority however, confirmed the demand of Rs. 2,74,939/- alongwith interest thereon as stated above while denying the benefit of cenvat credit on the said items. Aggrieved by the said order, the appellants carried the matter in appeal before the Commissioner (Appeals). However, the same was dismissed by the impugned order while confirming the findings of the adjudicating authority.
4. Learned Advocate for the appellants placing reliance in the decision of the Apex Court in the matter of CCE, Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd. reported in 2010 (255) ELT 481 (SC) submitted that the items in question were not only used in fabrication of various equipments in the appellants factory but were also used for making pipeline and various other equipments like storage tanks. There is nothing on record to show as to how much of quantity of the items was used for such purposes and how much was used for the purpose of fabrication of various other items and, therefore, the authorities below without ascertaining the same would not be denied the credit in relation to the duty paid on all the items. The appellants had taken a specific defence in reply to the show cause notice that some of the items were also used for making pipelines and other equipments like storage tanks and, therefore, it was necessary for the authorities below to enquire into the matter and ascertain as to the quantity of the items utilized for making of the equipments on which the cenvat credit would be available to the appellants and to grant the same. Having failed to do so, the impugned order should be set aside.
5. The DR on the other hand, placing reliance in the decision of the Larger Bench of the Tribunal in the matter of Vandana Global Ltd. vs. CCE, Raipur reported in 2010 (253) ELT 440 (Tri. LB) and drawing attention to the finding in the impugned order that the impugned goods were used for making shed in the factory besides at various stages the supporting structures were also fabricated submitted that there is no challenge to the said finding and therefore the case is covered by the decision of the Larger Bench in Vandana Global.
6. There is no doubt that the authorities below have arrived at concurrent findings about the utilization of the items in question for the purpose of fabrication of structures in the factory of the appellants. At the same time, it is also equally true that the appellants in response to the show cause notice had taken the specific defence that various items were also used for making pipelines and other equipment like storage tank, in support of the contention that the appellants were entitled to avail cenvat credit in relation to the duty paid on such items. However, mere raising of defence that itself does not amount to producing the proof in that regard. The contention that pursuant to such defence being raised, it was obligatory for the authorities below to enquire into the said aspect and to ascertain whether some of the items or part of the items were used for making pipelines and other equipments like storage tank and based on such ascertainment to decide about entitlement of the appellants to avail the cenvat credit cannot be accepted. Once the defence was raised by the appellants, it was essentially for the appellants to lead necessary evidence in that regard. Mere raising of plea in answer to the show cause notice does not by itself mean the proof of correctness of such plea. When the plea relates to certain factual aspect, it is absolutely necessary for the person raising such plea to make the same good by producing sufficient evidence in support of such plea. Undisputedly, the appellants did not produce any such evidence in support of such plea.
7. Learned Advocate submitted that the appellants did produce the photograph of various items in that regard. Mere production of photographs do not amount to proof in support of such plea. Firstly, the photographs are secondary proof. Secondly, photographs are always required to be proved by examining the person who had clicked the photographs. The law in that regard is well settled.
8. As far as the decision of the Apex Court in Rajasthan Spinning & Weaving Mills case is concern, the same relates to the period prior to 2002 and was in terms of the provisions of law comprised under Rule 57Q of the Central Excise Rules, 1944. Besides the Apex Court in the said case had clearly observed that-
12. Inter alia observing that capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances if any of these goods is used for producing or processing of any goods or for bringing about any change in the substance for the manufacture of final product, although this view was expressed in the light of the afore-noted definition of capital goods in the said Rule, which is not there in Rule 57Q as applicable in the instant case, yet the user test evolved in the judgment, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods, would apply on all fours to the facts of the present case, in fact, in para 6 of the said judgment, the court noted the stand of the learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether an item falls within the purview of capital goods would depend upon the user it is put to.
9. In Vandana Global case the Larger Bench while dealing with the issues whether the term capital goods can include plant, structures embedded to earth whether the goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures can be treated as inputs in relation to their final products as inputs or capital goods, or none of the above and whether the credit can be allowed in respect of goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures and plant, after taking into consideration various decisions of the Apex Court as well as High Court and Tribunal, has observed that the Cenvat Credit Rules allow credit of duty paid on capital goods used in the factory of manufacturer for the final product and the inputs used in or in relation to manufacture of the final product. It has further observed that factory shed, building, foundation and structures have not been specifically listed under the definition of capital goods. It was also held that the foundation and supporting structures are neither machine items, nor components, spares and accessories of machineries, nor listed for special inclusion in the definition. The foundation and supporting structures of the machinery cannot be considered to be part or accessory of machinery. The capital goods have to be goods first and that the foundation and supporting structures being embedded to earth are in the nature of immovable property and are not goods or excisable goods. With the above finding the issues were answered by the Larger Bench as under:-
49. In the light of the foregoing findings, we answer the questions referred to the Larger Bench as follows:-
(a) The term capital goods has been defined in the Cenvat Credit Rules, which in turn have been framed under the rule making powers conferred under Section 37(2) of the Act. The said Section refers to credit of duty paid on goods used in, or in relation to the manufacture of excisable goods. Hence, capital goods defined in the Cenvat Credit Rules in the context of providing credit of duty paid, have to be excisable goods. Whether a particular plant or structure embedded to earth can be considered as excisable goods or not has to be determined in the light of the decisions of the Honble Supreme Court on the issue, which is no longer res integra.
(b) Goods like cement and steel items used for laying foundation and for building supporting structures cannot be treated either as inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the Cenvat Credit Rules for the impugned period
10. As far as merits of the case is concerned, the same do not warrant any interference in the impugned order in that regard. Learned Advocate for the appellants however justified in contending that in view of divergent views expressed by different Benches of the Tribunal there was no justification for imposition of penalty. Certainly, therefore, the intention to evade the payment of the revenue cannot be drawn from the materials on record in the facts and circumstances of the case. Hence, as far as penalty is concerned, the order in that regard is liable to be set aside. As far as penalty is concerned and the impugned order to that extent is hereby quashed and set aside. No further interference is called for.
11. Taking into consideration the facts and circumstances of the case in hand and a clear finding by the authorities below that the items were used for making shade in the factory besides under various supporting structures were fabricated, and the same being clearly borne out from the record and the appellants having merely raising the plea about utilization of such items for making other items pipes without producing any cogent material in that regard, I do not find any case for interference in the impugned order. Hence, the appeal fails.
12. The appeal accordingly stands disposed of in above terms.
[Justice R.M.S. Khandeparkar] President /Pant/ ??
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